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FDI in education soon: Kapil Sibal

delhi Updated: Jun 26, 2009 03:20 IST
FDI in education soon: Sibal

There’s money in knowledge with Kapil Sibal’s new deal for education announced on Thursday.

The Union Minister for Human Resources Development promised to invite private capital — both Indian and foreign — to invest in education.

India has a total of 219 million students of which 40 per cent are enrolled in private schools while about 142 million children are not in the school system. About 75,000 private schools account for only 7 per cent of the total number of institutions.

In February 2008, international brokerage firm CLSA, headquartered in Hong Kong, had estimated the size of the private education market in India to be worth $40 billion (then Rs 160,000 crore).

Of this the Kindergarten to Grade 12 (K-12) segment was estimated at $20 billion (Rs 80,000 crore), private professional colleges at $7 billion (Rs 28,000 crore) and others like preschools and vocational training at $1billion (Rs 4,000 crore) and $1.4 billion (Rs 5,600 crore) respectively.

While the present potential is yet to be estimated, “This will be a very good move. We desperately need more investment,” Ajit Rangnekar, dean of the Indian School of Business told Hindustan Times. “The move will tempt large industrial houses to invest and stop the current drain of foreign exchange that happens when Indian students go abroad for higher studies. Our only plea is that Indian industries are given a level playing platform.”

Sibal rated foreign direct investment (FDI) in education along with increased private participation as government’s top priority. “We will allow profit from education to be invested in setting up new educational institutions,” he said. His proposal seems to take forward a ruling in 1966 by the Supreme Court that prohibited “commercialization of education” but allowed institutions to earn “reasonable surplus” to be used for expansion of education.

To allow profit-making, the government will have to amend Section 25 of the Companies Act, which allows companies to set up non-profit educational institutions. “But it would mean institutions would lose Constitutional protection and they will have to pay taxes like any other service provider,” said Rajeev Dhawan, constitutional expert.

“With increased investment, the teaching community will see an upward movement as well,” Ninad Karpe, chief executive officer and managing director computer learning-centre chain Aptech Limited told Hindustan Times.

What Indians have to watch out for though are the quality of facilities provided by private educators. Between 1956 and 1990, only 29 institutions were granted ‘deemed university’ status. In the last 15 years, however, 63 institutions were declared deemed universities and in the last five years alone, 36 institutions, excluding regional engineering colleges (RECs) have been notified as deemed universities.

The Yashpal Committee has recommended a slew of measures to ensure transparency in allowing private education providers into the market.

Sibal’s proposal comes a day after publishing house Pearson announced plans to invest $30 million (Rs 145 crore) in education companies Educomp and TutorVista.